(FORTUNE Magazine) – When I was a boy, my grandfather gave me a few shares of Eastman Kodak. I never got a chance to talk to him about it, but I'm sure his thinking was, "Taking pictures is a great business. People will always take pictures, and Kodak is the big fish in that pond." Well, for years my grandfather was right, and Kodak was a fair, though by no means stellar, stock. Now, however, it seems that only the first part of Grandpa's axiom holds true. Everyone still takes pictures, but increasingly Kodak isn't the big fish in the photography business.

Despite all of Kodak's best efforts, this grand old American brand could very well go the way of Wang and Xerox. Which is to say the company may be hanging around for years, but for all intents and purposes, it'll just be twisting slowly in the wind.

EK is under siege. On one side, Fuji and others are chipping away at Kodak's very profitable consumer film business. On the other, the digital image revolution (i.e. digital photography) is hitting critical mass. Yes, Kodak is a big player in that arena, but even if it succeeds there--which is far from clear--that's a much less profitable business than those little yellow boxes.

Take a look at the numbers. In 1991, Kodak had $19.4 billion in sales. Last year, it's expected to have done just a bit over $13 billion. And while net income hit close to $1.4 billion in 2000, that's about what it earned in 1988. The company has recorded "nonrecurring" losses in ten of the past 12 years. Kodak's dividend is now $1.80 per share, but some analysts don't think the company will earn that this year. The stock, which hit $94 in 1997, now trades for $27. (How long, you might ask, before the good people at Dow Jones do what they did to Woolworth, Bethlehem Steel, and Union Carbide, and throw EK off the DJIA?)

But there is an even more disturbing figure for EK shareholders: Sales of digital cameras climbed an estimated 30% last year, to 5.5 million units. Now, Kodak makes digital cameras--in fact, it recently became the market share leader. But (1) Kodak's digital camera business isn't profitable, (2) every time someone buys a digital camera he is no longer a customer of the company's high-margin film business, and (3) to succeed, Kodak must compete with the likes of Sony and Canon.

Kodak says it's hurting because of the recession and the slump in travel since Sept. 11. ("Why then," asks one short-seller, "is its medical imaging business also slumping?") As for digital photography, the company says that it's not only selling cameras but also high-quality paper and other digital photo-finishing services. Again, though, margins there are nothing like those in film. The other problem with digital photography is that consumers seem to print far fewer images. Why bother? You just store 'em on a disk or PC and print out the few you want when you want 'em.

Management at Kodak has long been considered--to quote one knowledgeable Wall Street source--"entrenched, inbred, and unresponsive." (And one key outsider, COO Patricia Russo, just left to head up Lucent.) I doubt, however, that any manager could "turn around" Kodak. What's happening doesn't lend itself to a restructuring. To exaggerate only slightly, we are talking buggy whips here. Film for Kodak is somewhat like long distance for AT&T: a mature, still profitable business that's very much in decline. One thing to do would be to take Kodak's film operation and turn it into some sort of master trust that pays out cash to shareholders. But that would probably require a level of fortitude that only an outside-raider type like Carl Icahn possesses.

Sure, film will be around for years, but let's be real: Digital cameras are totally changing how we take pictures. Here's a story: Friend of mine told me about a woman who mostly uses a digital camera. One day she had her old SLR instead. Her daughter looked in the back of the camera after a shot and asked Mommy where the picture was. "This camera doesn't let you see the picture," Mom said. "Then why are we using it?" the kid asked. Get the picture?

Will Dixie rise again?

You don't know Winn-Dixie? You must be from up North some place. Winn-Dixie is a Southern supermarket chain with over 1,100 stores in 14 states, and it's, well, not doing so great. Now No. 145 on the FORTUNE 500, it was the nation's fifth-biggest supermarket chain in the '60s. It was so powerful that the Federal Trade Commission imposed a ten-year moratorium on its buying more stores domestically.

Founded in Florida in 1925 by William Davis--his heirs still control 41% of the company's stock--WIN raised its dividend for 54 straight years, until 1997. So what happened? Well, the food-retailing business changed and Winn-Dixie didn't. The company's aging stores haven't kept pace with newfangled competitors. Specifically, Publix in WIN's Florida stronghold, and Wal-Mart all over, have been eating Winn-Dixie's lunch! Food vet Al Rowland came in as CEO to turn things around in 1999. No signs of that yet. Company could always get gobbled up!

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